Indonesia’s Central Statistics Agency (BPS) recorded national inflation at 3.08% as of May 2026. From a macroeconomic perspective, this figure is considered safe and under control. Yet, conditions on the ground suggest a different reality. People have been complaining about rising living costs, ranging from food and automotive products to vehicle spare parts and technological devices.
Responding to the discrepancy between macroeconomic data and market realities, UGM economist Dr. Wisnu Setiadi Nugroho stated that surging food prices should not be underestimated. Food commodities carry significant psychological weight, particularly for low-income groups, whose budgets are largely spent on meeting basic consumption needs.
“Food carries substantial psychological and economic weight, especially for low-income groups whose expenditures are largely absorbed by food. Therefore, even when aggregate inflation appears under control, people’s real purchasing power and psychological burden can decline sharply. This explains the gap between macroeconomic claims and public complaints in the marketplace,” said Dr. Wisnu on Wednesday (Jun. 10).
According to him, pressure on public welfare is intensifying as global oil prices continue to rise, driving up domestic fuel prices and weakening the rupiah against the US dollar. The average crude oil price in international markets has reached USD 100.43 per barrel. This figure is significantly higher than the 2026 State Budget’s macroeconomic assumption of USD 60–80 per barrel, with a midpoint of USD 70 per barrel. This situation is expected to further narrow the state budget’s fiscal space, especially given the allocation of funds for several new national programs introduced under the Prabowo-Gibran administration.
Given rising global oil prices, Dr. Wisnu believes budget efficiency is unavoidable. Therefore, he emphasized that programs consuming large portions of the state budget should undergo a comprehensive evaluation.
“In my view, the approach cannot be black and white. The key is balance. Fiscal space is becoming increasingly limited, making budget efficiency a necessity. New programs, such as the Free Nutritious Meals program (MBG), need to be evaluated for targeting accuracy and scale. This does not mean they should be discontinued, but they could be scaled down and focused only on those who need them the most,” he stressed.
Dr. Wisnu added that efforts to safeguard the welfare of lower- and middle-income groups should be combined with the optimization of existing social safety net programs.
“At the same time, programs that have proven effective and well-targeted, such as the Family Hope Program (PKH) and the Smart Indonesia Program (PIP), should be strengthened because their impact on poor households is more direct. Keeping fuel prices under control is also important to manage inflation expectations, but this must be accompanied by expenditure reforms to ensure the state budget remains healthy,” he suggested.
Beyond fiscal challenges at the national level, price stability at the regional level is also threatened by climate change risks. Entering the second half of 2026, the El Niño phenomenon is predicted to disrupt agricultural productivity. Its effects are already being felt through rising prices of several horticultural commodities in the market, including tomatoes and chili peppers.
In response to the potential escalation of food prices, Dr. Wisnu emphasized that regional governments play a highly strategic role in maintaining control of the situation. According to him, local administrations should not merely react once prices have already surged but must instead implement tactical and realistic emergency measures at the local level.
“The most realistic emergency measure is intervention at the local level through Regional Inflation Control Teams (TPID). This can take the form of market operations, facilitating interregional distribution, or establishing direct cooperation with production centers. In addition, regional governments need to seriously promote food diversification and diversify sources of supply,” he explained.
Dr. Wisnu also urged regions to begin building long-term food self-sufficiency to reduce dependence on centralized supply sources. The success of several regions in shortening food distribution chains serves as a practical example worth replicating. “We should not rely excessively on a single production area. Several regions have already demonstrated good practices, such as shortening supply chains or promoting local horticultural production. These efforts need to be replicated. Regional governments should not only be reactive but should start building regional supply resilience,” he said.
Furthermore, Dr. Wisnu outlined increasingly complex domestic challenges stemming from global and national monetary tightening policies, which have pushed benchmark interest rates to record highs. He warned of the systemic impacts facing micro, small, and medium-sized enterprises (MSMEs) as well as lower- and middle-income communities, which are increasingly burdened by loan repayments and limited access to capital.
“From a development economics perspective, these groups are actually quite resilient, but they are not immune to prolonged shocks,” he explained.
In addition, Dr. Wisnu encouraged the government to immediately reintroduce financial sector protection schemes, not only to preserve short-term liquidity but also to maintain people’s ability to withstand and recover from economic pressures.
“The most urgent priority is temporary credit protection, similar to policies implemented during the pandemic: loan restructuring, repayment deferment, or highly targeted interest subsidies. In addition, non-credit assistance programs should be expanded, including marketing support, simple digitalization initiatives, and improved market access,” he said.
In closing, Dr. Wisnu reminded the public that soaring prices of essential goods, despite seemingly moderate macroeconomic inflation figures, reflect the real challenges currently facing the nation. According to him, the main issue today is no longer simply maintaining favorable indicators on paper but managing the unequal impacts of economic policies.
“The phenomenon of rising prices while macroeconomic inflation appears under control shows that our challenge is no longer merely about numbers but about the distribution of economic burdens. Policies need to be more sensitive to household consumption structures, not just aggregate stability,” he concluded.
Author: Aldi Firmansyah
Editor: Gusti Grehenson
Post-editor: Jasmine Ferdian
Photo: Magnific